The losses continue to mount at Motorola, which reported a fourth-quarter loss on write-downs and provided worse-than-expected guidance for the first quarter.
The company plans to deepen cost cutting and suspend quarterly dividend payments in an effort to strengthen its balance sheet. Motorola also said that Edward Fitzpatrick, senior vice president and corporate controller, will add the role of CFO to his duties, replacing Paul Liska.
Motorola posted losses of $3.6 billion, or $1.57 per share, for the fourth quarter ended Dec. 31, compared with profits of $100 million, or 4 cents per share, in the same period last year.
“In light of the economic climate and challenges we face, we have implemented aggressive measures to reduce costs and improve financial flexibility, particularly in Mobile Devices. The cost-reduction actions under way are expected to generate aggregate savings of approximately $1.5 billion in 2009,” said CEO Greg Brown and CEO of Mobile Devices Sanjay Jha in a statement.
The company lowered its first-quarter guidance to a loss of 10 cents to 12 cents per share. Analysts had expected a 6-cent loss for the first quarter.
Devaluation of Motorola’s non-cash assets accounted for $1.56 of the $1.57 per share loss. The per-share write-down included 91 cents in tax valuation costs and 71 cents of goodwill impairment. Analysts had expected the company to post a 1-cent per-share loss for the fourth quarter, with more optimistic analysts predicting the company would break even.
Motorola posted sales of $7.136 billion, a 26 percent decline over last year’s sales of $9.646 billion.
Motorola has struggled to keep its handset segment profitable. Fourth-quarter losses in that segment deepened to $595 million on top of last year’s $388 million loss. Revenue also took a hit, falling 51 percent to $2.35 billion from $4.811 billion last year.
The handset division, which accounts for about 40 percent of the company’s sales, has been hemorrhaging cash for some time. The company flirted with the idea of selling it off last March but ultimately canceled the idea when a suitable buyer failed to emerge.
Problems in Motorola’s handset division have huge implications for the company, reports UBS Investment Research analyst Maynard Um. “Much of the company’s future success requires continued improvement in the company’s mobile phone business, the majority of revenue and operating profit of the Mobile Device Sector,” he reports. “Failure to execute in this division with respect to new product design, production and operating efficiency could have a negative impact on earnings estimates going forward, which could lead to further weakness in the stock.”
In addition to the 3,000 cuts announced in the fall, Motorola said in January that it would cut about 6 percent of its staff, or 4,000 workers. About three-quarters of those cuts would be in the handset division.
Analysts point to a series of missteps in the handset division, including missed deadlines and the launch of a cameraphone without 3G support.